President-elect Barack Obama yesterday placed his cards face up on the nation’s table. Speaking at George Mason University, Obama declared that “…only government can provide the short-term boost necessary to lift us from a recession this deep and severe. Only government can break the cycle that is crippling our economy….” The Los Angeles Times noted the contrast between Obama’s big brother approach and ”Republican Ronald Reagan [who] once quipped that the most ‘terrifying words’ in the English language were ‘I’m from the government, and I’m here to help.’ The argument over the virtues and vices of limited government is, for now, over. And the winner is: BIG GOVERNMENT.
No question about it, the nation is on the brink of the largest expansion of government power in history, and average Americans seem to be supportive of the gambit. Quoted in the Times, Democratic pollster Mark Mellman offered, “There has been a sea change in people’s attitudes. They’re much more interested in having government help them than in how government might hurt them.” Too bad, because we’ve been down this road before, but most Americans are unaware of the damage done by government intervention during the Great Depression.
Contrary to the popular impression that President Franklin Roosevelt “saved the country in peace, and then he saved it in war,” to quote Amity Shlaes in her excellent book ”The Forgotten Man,” government policies under Roosevelt and Hoover not only prolonged the Depression but, according to Ms. Shlaes, actually caused it. “The crash did not cause the Depression. It was a necessary correction of a too-high stock market, but not a necessary disaster.” First Hoover and then Roosevelt took action that turned what should have been a short-lived serious recession into the mother of all economic downturns. “Hoover ordered wages up when they wanted to go down” and raised taxes, placing a further drag on the economy at the worst possible time. But Hoover’s biggest blunder was signing the catastrophic Smoot-Hawley tariff law, virtually guaranteeing a world-wide economic downturn.
Roosevelt’s efforts to help the economy “were equally devastating,” according to Shlaes. Public works squeezed out private initiative. Price fixing inevitably led to shortages. Perhaps worst of all was the President’s willingness to try any proposed solution, then abruptly change course, marching the recovery effort off in a new direction. This uncertainly caused American businesses to hoard cash at the very time new investment was sorely needed. Shlaes reminds us that “After 1932, New Zealand, Japan, Greece, Romania, Chile, Denmark, Finland, and Sweden began seeing industrial levels rise again — but not the United States.”
Alas, Obama seems eager to repeat the pell-mell approach to economic recovery. From the Times: “[Obama] said he would ‘act boldly,’ a phrase echoing Franklin D. Roosevelt’s promise, in the teeth of the Depression, to pursue ‘bold, persistent, experimentation.’ ‘It is common sense to take a method and try it; if it fails, admit it frankly and try another,’ Roosevelt said in 1932. ‘But above all, try something.’” Had Roosevelt been taking about gardening or darts, we might agree. But blindly thrashing about grasping for solutions in the midst of a serious economic downturn should never be confused with the exercise of common sense. Spending billions or trillions of borrowed dollars should be preceded by the most meticulous research and planning imaginable. Otherwise, enormous sums of money might be wasted, resulting in an economy worse off than if nothing had been done.
President Bush’s initial $700 billion bailout bill comes to mind. Hurriedly cobbled together and rushed into law, we now know that the expenditure of the first $350 billion did not have the intended effect of restoring bank’s willingness to lend to each other. Rather, financial institutions in receipt of the handouts are hoarding the money against another round of foreclosures. The dissipation of $350 billion did not free up the credit markets as promised. Fine then, to follow Roosevelt’s and Obama’s logic, let’s try plan B. The problem is, of course, that no one is held accountable for the misallocation of this huge sum, and taxpayers are on the hook for the payback, all of which explains politician’s capriciousness with money not their own. Today’s Washington insiders have little concern for stewardship. To paraphrase a quote attributed to Everitt Dirksen, $350 billion here and $350 billion there and pretty soon you’re talking real money. But there is more bad news.
Our 44th President plans on spending some $800 billion in an effort to jump-start the economy, promising the creation of “at least 3 million jobs over the next few years.” Of course, much of that money will be directed to pet environmental projects Democrats have been advocating for years. “We will put Americans to work in new jobs that pay well and can’t be outsourced, jobs building solar panels and wind turbines, constructing fuel-efficient cars and buildings, and developing the new energy technologies that will lead to even more jobs, more savings, and a cleaner, safer planet in the bargain.” As any economist worth his salt will tell you, government mandated production that doesn’t take product demand into account is simply economic folly. Wealth is created through the most efficient use of scarce resources. Building cars Americans don’t want to buy or drive makes sense only in an autocracy. And, as one energy expert put it, “the sun doesn’t always shine and the wind doesn’t always blow.”
America may be heading toward full-tilt centralized planning. The feds now have a stake in the nation’s largest banks and car manufacturers, and those companies in turn are taking marching orders from Washington. A man who before he was elected scolded us with, “We can’t drive our SUVs and eat as much as we want and keep our thermostats on 72 degrees” should not be trusted with unfettered access to power or money. If Congress and the American people fold under the pressure of Chicken Little urgency, American government under Barack Obama may finally and forever reach beyond any reasonable definition of limited government. We may very well find ourselves on the far side of a tipping point, able to experience government of, by, and for the people in memory only. By then, of course, wasting hundreds of billions of dollars will have become routine. O wait, that’s already happened.
Anyone else see the solution in less government, not more?
Posted by Jerry Pomeroy in Economics, Government Blunders, Government Waste, Obama Presidency